Prices Of Used Cars Begin to Fall

Since the recession has ended, the average price of a used car was soared due limited supply. But The Detroit News says with more vehicles coming in due to leases coming to an end, prices are beginning to fall. According to CNW Research, the average transaction price of a used car in September was $10,963. Compared to the same time last year, the average has dropped 2.1 percent.

"During the recession, it almost cost as much to get a used car as it did to get a new car, but now the market is going back to historical norms and it's going to be better every month. From 2008 to 2012, there was a significant growth in the number of leased cars and now they're all coming back to the market. As supply is increasing, auction values are dropping ... making used cars more affordable," said Larry Dominique, vice president of TrueCar.

Used car supplies are on the rise as well, with 9.76 million vehicles sitting on used lots in September. That's an increase of 1.5 percent when compared to the same time last year.

But there are downsides to increase in used car supplies. Analysts say the increase of supplies means it will be harder for dealers to move vehicles. Also expect an increase in lease rates.

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This is great news for younger people looking for a deal on a low mileage returned leased auto where they could afford a new lower end auto like an Acadia, but can get a Fully Loaded Denali Acadia for the same price with only 20-30K miles on it.

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A record number of consumers are finding themselves 'underwater' when it comes time to trade-in their vehicle - the vehicle is worth less than what they owe on their loan.
The Detroit Free Press cites a study done by Edmunds revealing that in the second quarter of this year, 32 percent or nearly one-third of vehicles being traded in fall into the 'underwater' category. This isn't good news for consumers since the difference is tacked on to the new vehicle they had their eye on.
To put this in perspective, the previous high was 29.2% in 2006, around the time where the housing market was reaching its cresting point.
“There’s been a lot of water building behind this dam for some time because of higher transaction prices, lower down payments and long-term loans," said Greg McBride, chief analyst with Bankrate.com.
"It’s problematic for the consumer because there’s no foolproof way to eliminate his financial exposure. If the car gets stolen, is totaled or you get new car envy while you’re upside down then it’s a big problem."
In October, the average transaction price of a new car was $34,663 according to Kelly Blue Book.
The average length of a new car loan hovers around 68 months according to Experian Automotive. This rises to 72 months if it's a subprime buyer - someone whose credit score is below the low 600s.
Not helping matters is the amount of vehicles being returned from leases, flooding the used car marketplace. This increase is causing dealers not willing to spend a lot of money at auction.
Source: Detroit Free Press

A record number of consumers are finding themselves 'underwater' when it comes time to trade-in their vehicle - the vehicle is worth less than what they owe on their loan.
The Detroit Free Press cites a study done by Edmunds revealing that in the second quarter of this year, 32 percent or nearly one-third of vehicles being traded in fall into the 'underwater' category. This isn't good news for consumers since the difference is tacked on to the new vehicle they had their eye on.
To put this in perspective, the previous high was 29.2% in 2006, around the time where the housing market was reaching its cresting point.
“There’s been a lot of water building behind this dam for some time because of higher transaction prices, lower down payments and long-term loans," said Greg McBride, chief analyst with Bankrate.com.
"It’s problematic for the consumer because there’s no foolproof way to eliminate his financial exposure. If the car gets stolen, is totaled or you get new car envy while you’re upside down then it’s a big problem."
In October, the average transaction price of a new car was $34,663 according to Kelly Blue Book.
The average length of a new car loan hovers around 68 months according to Experian Automotive. This rises to 72 months if it's a subprime buyer - someone whose credit score is below the low 600s.
Not helping matters is the amount of vehicles being returned from leases, flooding the used car marketplace. This increase is causing dealers not willing to spend a lot of money at auction.
Source: Detroit Free Press

Another week has passed and some new information has come to light in the Volkswagen diesel scandal.

First off, Volkswagen has confirmed one of their diesel engines doesn't have the cheat. The EA 288 TDI engine used in vehicles for the European-market has been checked out to see if it had the illegal software. In a statement issued by Volkswagen, the engine did not have “software constituting an improper defeat device as defined in laws is installed in vehicles with EA288 EU5 as well as EU6 engines in the European Union with those engines comply with legal requirements and environmental standards."

Also, one of the questions that have been up in the air is how would the scandal affect the prices of used Volkswagen TDI models. Kelly Blue Book looked at data from auto auctions before and after the scandal broke. According to their research, the average price of diesel models dropped 16 percent. Average prices of gas models dropped 2.9 percent in the same time.

"According to Kelley Blue Book Field Analysts, some auctions are still holding off on selling the affected Volkswagen inventory. While Volkswagen diesel auction prices are in decline, we could see larger fluctuations depending on how this inventory is handled," said Tim Fleming, analyst for Kelley Blue Book.

Another week has passed and some new information has come to light in the Volkswagen diesel scandal.

First off, Volkswagen has confirmed one of their diesel engines doesn't have the cheat. The EA 288 TDI engine used in vehicles for the European-market has been checked out to see if it had the illegal software. In a statement issued by Volkswagen, the engine did not have “software constituting an improper defeat device as defined in laws is installed in vehicles with EA288 EU5 as well as EU6 engines in the European Union with those engines comply with legal requirements and environmental standards."

Also, one of the questions that have been up in the air is how would the scandal affect the prices of used Volkswagen TDI models. Kelly Blue Book looked at data from auto auctions before and after the scandal broke. According to their research, the average price of diesel models dropped 16 percent. Average prices of gas models dropped 2.9 percent in the same time.

"According to Kelley Blue Book Field Analysts, some auctions are still holding off on selling the affected Volkswagen inventory. While Volkswagen diesel auction prices are in decline, we could see larger fluctuations depending on how this inventory is handled," said Tim Fleming, analyst for Kelley Blue Book.

Source: Volkswagen, Kelly Blue Book

Press Releases are on Page 2

Volkswagen confirms: EA288 engines designed for EU5 and EU6 are not affected
Thorough appraisal of the Diesel emissions issue

Volkswagen confirms today that no software constituting an improper defeat device as defined in law is installed in vehicles with EA 288 EU5 as well as EU6-engines in the European Union. Consequently, new vehicles of the Volkswagen Group offered within the European Union with those engines comply with legal requirements and environmental standards.

Volkswagen AG is systematically reviewing this issue worldwide. The group strives for a holistic solution for complying with the respective valid standards.

After thorough examination it is now confirmed that no software constituting an improper defeat device as defined in law is installed in vehicles with EA 288 EU5-engines. Before, Volkswagen Group has confirmed that new EU6-compliant vehicles offered within the European Union fulfil all legal requirements and environmental standards.

Volkswagen customers can visit the corporate websites such as www.volkswagen.de/info, which was set up on October 2, 2015 and enter the chassis number of their vehicle to find out straight away whether their vehicles are affected. Similar customer websites are active in the other EU countries and for the Audi, SEAT and Škoda brands.

Work on the technical solutions detailed in the plan of measures is currently proceeding at full speed. Remedial action on the vehicles will begin in January 2016 – at no cost to customers. The measures are currently being developed for each affected series and each affected model year and will first be presented to the responsible authorities. Volkswagen will subsequently inform the owners of these vehicles over the next weeks and months.

IRVINE, Calif., October 21, 2015 – Kelley Blue Book www.kbb.com, the only vehicle valuation and information source trusted and relied upon by both consumers and the automotive industry, today reports that average auction prices, along with new-car shopping activity on KBB.com, for Volkswagen diesel vehicles have declined four weeks after the diesel emissions issue was announced.

The average auction price for Volkswagen diesel models dropped by nearly 16 percent since the news broke of the emissions crisis.[1] The average auction price for the brand's gasoline-powered vehicles declined by 2.9 percent.1 On KBB.com, Volkswagen new-car shopping activity for affected TDI models has decreased on average by 2.4 percent.

"According to Kelley Blue Book Field Analysts, some auctions are still holding off on selling the affected Volkswagen inventory," said Tim Fleming, analyst for Kelley Blue Book. "While Volkswagen diesel auction prices are in decline, we could see larger fluctuations depending on how this inventory is handled."

Volkswagen Site Metrics from Kelley Blue Book's KBB.com*
The Volkswagen Golf SportWagen and Golf have seen the most significant declines in shopping activity, with decreases of 6.2 percent and 3.7 percent respectively.
The Audi A3 and Volkswagen Jetta SportWagen are the only TDI models seeing increases in activity, at 1.6 and 3 percent respectively, which is consistent with segment-level traffic on KBB.com.
Audi A3 shoppers are increasingly cross-shopping competing luxury models following the announcement. The most highly cross-shopped vehicles are the Lexus NX, BMW 2-Series and Mercedes-Benz CLA. **

"During the past four weeks following the emissions announcement, traffic to KBB.com has generally decreased after an initial surge in interest for Volkswagen diesel models, likely because of the stop-sell and negative press," said Arthur Henry, senior manager of Strategic Insights for Kelley Blue Book. "Interestingly, with regard to cross-shopping data, consumers are not looking at fuel-efficient or hybrid vehicles. For example, shoppers interested in the Jetta TDI are looking to the Honda Civic, Mazda3 and Ford Fusion as alternatives, according to cross-shopping data from KBB.com."

With the average price of new cars on the rise, the price of used cars follows suit. A new study done by Edmunds finds the average price of a used car has hit a new record high in the second quarter. The average price of a used car has climbed to $18,800, up 7.6 percent when compared to the same time last year.

"People are buying more trucks and SUVs, and they're getting them better equipped. More expensive new vehicles means more expensive used vehicles," said Jessica Caldwell, analyst at Edmunds.com.

What is causing the uptick in used car prices? The same items which are causing new car prices to go up; better economic outlook, low unemployment, low-interest rates, and low gas prices.

But also helping the increase is the amount of off-lease vehicles entering into the used car marketplace.

"With inventory finally at a better place, people have a lot more options," Caldwell said.